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Cryptomining can be lucrative, but it comes with an environmental cost

Coinbase IPO
Posted at 1:33 PM, Jul 02, 2021
and last updated 2021-07-02 15:35:36-04

LANSING, Mich. — Luke Lauterback started mining cryptocurrency because he was cold. Mining cryptocurrency on his basement computer has replaced their space heater.

"I realized at one point that that was just kind of throwing away my electricity and my money," Lauterback said. "So I thought, 'well, my computer gets hot. Why not just try this crypto thing and see if I can just make a couple bucks trying to replace my space heater?'"

Lauterback's computer gets hot enough to keep him warm because mining cryptocurrency takes a lot of power.

A single Bitcoin transaction uses the same amount of power that an average American household consumes in a month, according to Digiconomist, and is responsible for roughly a million times more carbon emissions than a single Visa transaction.

Mining cryptocurrency on his basement computer has replaced their space heater.

Cryptocurrencies like Bitcoin are basically digital money, and those that mine for it are helping create it. Mining is essentially using a computer to verify cryptocurrency transactions.

A computer runs complex math problems through mining software. Every time the computer correctly solves a math problem, validating a transaction, a small amount of cryptocurrency is created. A percentage of that new currency goes to the miner.

For Lauterback, a husband and father of one, being a miner has been pretty profitable.

For Lauterback, a husband and father of one, being a miner has been pretty profitable.

"I mine whenever my computer is idle, for about 23 hours a day," he said. "I've been doing this for about six months, and I've been making about $230 a month in profit."

"People who don't know anything about technology could easily start cryptomining in just a few minutes," he added.

Because it's so easy, cryptominig has taken off in recent years. Small-time investors fueled by billionaires like Elon Musk and their support for currencies like Dogecoin have also facilitated the spread of the practice.

A January 2021 survey by the New York Investment Group found that an estimated 22% of adults in the U.S. have invested in Bitcoin. Of those respondents, 83% are looking to include Bitcoin in their future financial plans.

So what's the problem? The environmental effect of all those computers mining crypto.

Thomas Holt is the director of the School of Criminal Justice at Michigan State University. He studies cryptocurrencies and says the environmental impact could be huge if they continue to grow.

"The impact could be pretty huge, largely because they utilize so much electricity in order to produce the mining," he said.

"The impact could be pretty huge, largely because they utilize so much electricity in order to produce the mining."

China does the majority of the world's cryptomining, and "so much of their electricity depends on coal."

"So the impact of coal on the environment is part of the problem," Holt said.

Bitcoin is one of the least eco-friendly currencies, and it's because of how creating the currency works.

Bitcoin is one of the least eco-friendly currencies, and it's because of how creating the currency works.

"They use what's called 'proof of work' in order to validate transactions within the blockchain," Holt said. "So basically, it means that you have multiple computers, multiple systems that are mining, all trying to solve a mathematical puzzle simultaneously. The first one to get it right is the one that gets the credit in the blockchain."

Some newer cryptocurrencies are getting away from "proof of work" and using "proof of stake."

"Proof of stake" holds a more sustainable future for cryptocurrencies because it only draws from one computer, which uses far less energy, but eliminates mining.

Ethereum, which Lauterback mines, is one of the cryptocurrencies switching to "proof of stake."

Ethereum, which Lauterback mines, is one of the cryptocurrencies switching to "proof of stake."

"Ethereum is moving to Etherium 2.0 in the next few years, and it will abandon mining so that it does not consume anywhere near as much electricity as it does right now," Lauterbach said. "What that will mean for me is I won't be able to mine Etherium anymore, and this will probably not be profitable in a few years. However, it'll be an overall positive for the crypto-community, as it will eliminate that environmental barrier."

TRG Datacenters in Houston, Texas, researched which cryptocurrencies are the most eco-friendly, ranking them by the amount of energy required to power each transaction.

Click here to read that list.

This story was originally published by Sarah Grimmer on Scripps station WSYM in Lansing, Michigan.

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